How to Run Due Diligence on a Commercial Real Estate Deal

Due diligence on a commercial real estate acquisition is the process of verifying every financial, legal, physical, and environmental detail of a property before closing. It typically runs 30 to 90 days, involves coordination across your internal team, attorneys, lenders, consultants, and brokers, and it is where roughly 30% of CRE deals fall apart. Running it well is the difference between closing a deal you understand and inheriting a problem you don't.

This guide covers the full process: what to review, in what order, on what timeline, and how to keep your team organized when you're managing multiple deals at once.

What does the due diligence period actually look like?

Most purchase agreements set a due diligence window of 30 to 60 days. Larger or more complex transactions, particularly development deals or portfolio acquisitions, stretch to 90 days or beyond. But the calendar starts the day the PSA is executed, and it does not pause when you fall behind.

Here is a realistic breakdown of how those days should be allocated:

Days 1 to 5: Kickoff and document requests

Send your full document request list to the seller on day one. Order third-party reports immediately: Phase I Environmental Site Assessment, Property Condition Assessment, appraisal, ALTA survey. These take 2 to 4 weeks to come back, so the clock is already running.

Days 5 to 20: Financial and lease review

This is where you verify the numbers the broker put in the OM. Pull the trailing 12-month operating statements, the current rent roll, historical occupancy data, utility bills, real estate tax bills, and insurance policies. Compare the seller's pro forma against your own underwriting. If the numbers don't match, find out why before you go further.

Days 10 to 30: Physical inspection and third-party reports

Walk the property. Inspect every unit, every roof, every mechanical system. Review the PCA when it comes in. Flag deferred maintenance and get contractor bids for anything that looks like a capital expense in the first 12 months. Review the Phase I ESA for recognized environmental conditions. If the Phase I flags anything, order a Phase II immediately. That adds 3 to 6 weeks.

Days 15 to 40: Legal and title review

Your attorney should be reviewing the title commitment, survey, existing liens, easements, CC&Rs, and zoning compliance in parallel. Title defects and zoning non-compliance account for 25% of failed CRE transactions, so this is not a checkbox exercise.

Days 20 to 50: Financing coordination

If you are placing debt on the acquisition, your lender will need their own due diligence package. Start assembling the lender package by week three so your loan commitment timing aligns with your PSA deadlines.

Days 40 to 60: Resolution and closing preparation

Negotiate seller credits for anything the inspections uncovered. Finalize the loan commitment. Prepare closing documents. Confirm title is clean.

The common mistake is treating these as sequential phases. They are not. Financial review, physical inspection, and legal review all run in parallel. If you try to do them one after another, you will run out of time.

What documents do you need to collect?

The document request list depends on the asset type, but here is the core set that applies to nearly every CRE acquisition:

Financial documents

• Trailing 3-year operating statements (income and expenses)
• Current rent roll with lease expiration schedule
• Trailing 12-month bank statements (for income verification)
• Real estate tax bills (current and prior 2 years)
• Insurance policy declarations and claims history
• Utility bills (12 months minimum)
• Capital expenditure history
• Budget and reforecast for the current year

Lease documents

• All executed leases, amendments, and side letters
• Tenant correspondence files
• Lease abstracts (if available)
• Security deposit ledger
• Accounts receivable aging report
• Estoppel certificates (request these from every tenant)

Property and environmental

• Phase I Environmental Site Assessment
• Property Condition Assessment (PCA/PNA)
• ALTA survey
• As-built drawings and site plans
• Certificate of Occupancy
• Building permits (open and closed)
• Roof warranty documentation
• Elevator inspection certificates
• Fire and life safety inspection reports

Legal and title

• Preliminary title report or title commitment
• Existing title policy
• All recorded easements, encumbrances, and CC&Rs
• Zoning confirmation letter or zoning report
• Pending or threatened litigation disclosures
• HOA or condominium documents (if applicable)
• Service contracts (HVAC, janitorial, landscaping, security, elevator)

Incomplete documentation accounts for 45% of failed CRE deals. That means nearly half the deals that die during due diligence fail because someone could not produce the right document at the right time. This is an organizational problem, not a legal one.

How do you coordinate due diligence across a team?

On a typical acquisition, your due diligence involves at least five parties: your internal deal team, your attorney, your lender, the seller (and their attorney), and your third-party consultants (environmental engineers, property inspectors, surveyors).

The coordination challenge is real. Every party is producing documents, requesting documents, and working on different timelines. If your internal team is tracking due diligence deadlines in a spreadsheet, version control becomes a problem fast. The Phase I comes back as v1, then the consultant sends a revision, and now two people on your team have different versions saved in different folders. Multiply that by every document on the list above.

Here is what works:

One centralized location for every deal file. Not a shared drive with 14 subfolders that follow different naming conventions depending on who created them. One system where every document is tagged, versioned, and accessible to everyone who needs it.

Task ownership, not task awareness. Every due diligence item should have a single owner and a due date. “The team knows we need estoppels” is not the same as “Sarah is responsible for estoppels by April 15.” When you are managing multiple deals at once, this distinction is the only thing that prevents items from falling through.

A deadline tracker that is not someone's memory. The PSA deadline, the loan commitment date, the title objection deadline, the inspection contingency expiration. These are hard dates with real consequences if missed. Teams are running more deals simultaneously than they were 18 months ago. Tracking deadlines across multiple deals in a spreadsheet column that nobody updates is how deadlines get missed.

Regular internal check-ins. A 15-minute standup twice a week during the DD period keeps everyone aligned. Review what is outstanding, what is blocked, and what needs escalation. Do not wait until the weekly pipeline meeting to surface a problem that could have been solved three days ago.

What kills deals during due diligence?

Not every deal should close. Good due diligence gives you the information to walk away when the numbers or the risk profile don't support the investment thesis. But some deals die for avoidable reasons.

Environmental contamination. A Phase I that identifies recognized environmental conditions (RECs) triggers a Phase II assessment, which involves soil and groundwater sampling. If contamination is confirmed, remediation costs can range from $50,000 to well over $1 million depending on the contaminant and the extent. Many buyers walk at this stage, especially if the PSA does not include an environmental indemnification from the seller.

Title defects that cannot be cured. Unreleased liens, boundary disputes, unrecorded easements that affect buildable area, or zoning violations that predate the current owner. Title insurance can cover some of these risks, but not all of them, and the exceptions matter.

Financial underperformance. The rent roll in the OM showed 95% occupancy, but the trailing bank deposits show collections closer to 85%. Or operating expenses are 20% higher than represented. These gaps between the marketed deal and the real deal are exactly what due diligence is designed to uncover.

Deferred maintenance. The PCA identifies $2 million in capital needs over the next five years, but your underwriting only budgeted $500,000. Either the purchase price comes down, the seller credits the difference, or the deal economics no longer work.

Financing timing misalignment. Your loan commitment expires before the seller can cure a title objection. Or the lender's appraisal comes back below the purchase price and the loan amount drops. Build extra buffer into your financing timeline.

How do you share due diligence materials with lenders and investors?

Your lender will need their own package, and it overlaps with but is not identical to your internal DD file. A typical lender due diligence package includes:

• Appraisal (ordered by the lender, paid by the borrower)
• Phase I ESA
• PCA
• ALTA survey
• Title commitment
• Rent roll and lease abstracts
• Trailing financial statements
• Borrower financial statements and entity documents
• Insurance certificates

If you have equity partners or investors, they will want access to a subset of these documents as well. The question is how you share them without creating a security or version control problem.

Email attachments are the worst option. You lose control of the document the moment you send it. You have no visibility into whether the lender opened the file. And when you need to update a document, you are sending another email that may or may not get matched to the original thread.

A deal room solves this. You select which files and folders to include, set access permissions, and share a single link. When you update a document, the lender sees the current version automatically. You can see who accessed what, when, and whether they downloaded it. If the deal dies, you revoke access in one click.

This matters more than most teams realize. When you are running due diligence on multiple deals simultaneously and each deal has its own lender, equity partner, and legal team, the document distribution problem scales faster than any spreadsheet or email thread can handle.

The operational side nobody talks about

Most due diligence guides cover what to check. Few cover how to actually manage the process. But for teams running three, five, or ten deals at once, the operational question is the one that determines whether deadlines get missed and deals fall apart.

Deal volume is increasing. Teams are not getting proportionally larger. That means every firm needs a system for tracking due diligence deadlines, organizing deal files, assigning task ownership, and sharing documents with external parties that does not rely on one person's memory or a spreadsheet that was last updated a week ago.

The teams that run the cleanest due diligence processes are not necessarily the ones with the biggest budgets. They are the ones with a single system that holds every deal, every document, every deadline, and every task in one place. If you are still running due diligence across a patchwork of shared drives, email threads, and spreadsheets, the overhead compounds with every deal you add.